Independent Bank Corporation · NASDAQ:IBCP
Independent Bank — Q4 2019 Earnings Presentation
26 slides from Independent Bank's earnings presentation, Jan 23, 2020
Slide 1: Independent Bank Q4 Earnings
INDEPENDENT BANK Q4 Earnings
Slide 2: Cautionary note regarding forward-looking statements
Cautionary note regarding forward-looking statements This presentation may contain “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Any statements that are not historical facts, including statements about our expectations, beliefs, plans,
Slide 3: Agenda
Agenda Formal Remarks.William B. (Brad) Kessel, President and Chief Executive OfficerRobert N. Shuster, retiring Executive Vice President and Chief Financial OfficerStephen A. Erickson, incoming Executive Vice President and Chief Financial OfficerQuestion and Answer session.Closing Remarks.Note: Thi
Slide 4: Quarterly Financial Summary
Quarterly Financial Summary 4Q’19 3Q’19 2Q’19 1Q’19 4Q’18 Diluted EPS $ 0.61 $ 0.55 $ 0.46 $ 0.39 $ 0.41 Income before taxes $ 17,225 $ 15,570 $ 13,417 $ 11,548 $ 12,204 Net income $ 13,879 $ 12,445 $ 10,730 $ 9,381 $ 9,936 Return on average assets 1.56% 1.42% 1.27% 1.13% 1.18% Return on average equ
Slide 5: 4Q 2019 Financial Highlights
4Q 2019 Financial Highlights Income StatementNet income of $13.9 million, or $0.61 per diluted share. Return on average assets of 1.56% and return on average equity of 15.92%. These ratios decrease to 1.47% and 14.97%, respectively, when excluding the after tax impact of the increase in the fair val
Slide 6: Five Year Financial Summary
Five Year Financial Summary 2019 2018 2017 2016 2015 Diluted EPS(1) $ 2.00 $ 1.68 $ 0.95 $ 1.05 $ 0.86 Dividends paid $ 0.72 $ 0.60 $ 0.42 $ 0.34 $ 0.26 Net interest income $ 122,581 $ 113,282 $ 89,186 $ 79,641 $ 74,986 Income before taxes $ 57,760 $ 49,133 $ 38,438 $ 32,901 $ 29,380 Net income(1) $
Slide 7: Our Michigan Markets
Our Michigan Markets Independent Bank branches – 68 Most recent Forbes “Best in Banks and Credit Unions” Survey (published in June 2019) ranked Independent Bank first in the State of Michigan in customer satisfaction.Acquisition of Traverse City State Bank on April 1, 2018 added five branches in att
Slide 8: Select Economic Statistics
8 Select Economic Statistics Unemployment Trends (%) Total Employees (Thousands) Regional Average Home Sales Price (Thousands) Annualized Home Sales (Thousands) Continued low unemployment rates Job growth continues Rising prices in key markets Slowing Michigan home sales Q4’19 Q3’19 Q4’19
Slide 9: Our Markets – Regional
Our Markets – Regional Region Cities Branches 12/31/19Portfolio Loans(1) % ofLoans(1) 12/31/19Deposits(3) % of Deposits(3) 12/31/18 Portfolio Loans(2) 12/31/18 Deposits(3) East / “Thumb” Bay City / Saginaw 23 $ 447 17% $ 769 27% $ 411 $ 781 West Grand Rapids / Ionia 21 844 32% 701 25% 775 714 Centra
Slide 10: Low Cost Deposit Franchise Focused on Core Deposit Growth
Low Cost Deposit Franchise Focused on Core Deposit Growth Deposit Highlights$3.04 billion in total deposits at 12/31/19.Substantially core funding.$2.43 billion of non-maturity deposit accounts (79.9% of total deposits).Total deposits increased $204.3 million, or 7.7%, since 12/31/18 (excluding brok
Slide 11: Diversified Loan Portfolio Focused on High Quality Growth
Diversified Loan PortfolioFocused on High Quality Growth Lending Highlights23 consecutive quarters of net loan growth.$2.795 billion in total loans at 12/31/19 (including $69.8 million of loans held for sale).4Q 2019 lending results include:Commercial loans net decline of $22.3 million due primarily
Slide 12: Strong Capital Position Focused on Shareholder Return
Strong Capital PositionFocused on Shareholder Return HighlightsPrudent capital management. Target TCE ratio – 8.50% to 9.50%. Priorities are: (A) capital retention to support (1) organic growth and (2) acquisitions; and (B) return of capital through (1) strong and consistent dividend and (2) share r
Slide 13: Net Interest Margin/Income Highlights
13 HighlightsInterest rate sensitivity profile of the loan and securities portfolios, in combination with a low cost core deposit base, positions us to slightly benefit from a rising interest rate environment.Net interest income decreased $0.16 million, or 0.5%, in 4Q’19 vs. 3Q’19 due primarily to a
Slide 14: Net Interest Income and Net Interest Margin Details
Net Interest Income and Net Interest Margin Details Summary4Q’19 net interest income of $30.710 million, down $0.162 million from 3Q’19. The linked quarter decrease was due to a $1.086 million decrease in interest income and fees on loans that was partially offset by a $0.183 million increase in int
Slide 15: Non-interest Income Highlights
15 Non-interest Income HighlightsDiverse sources of non-interest income which totaled $15.6 million in 4Q’19.4Q’19 total non-interest income represents approximately 33.7% of total revenue (net interest income and non-interest income).Service charges on deposits declined by $0.2 million, or 6.7%, in
Slide 16: Non-interest Expense Highlights
16 Non-interest Expense Highlights4Q’19 non-interest expenses of $29.3 million (an increase from 4Q’18 and from 3Q’19) were above the projected range for non-interest expenses of $27.0 to $27.5 million due primarily to higher than projected incentive compensation as described below. 4Q’19 compensati
Slide 17: Investment Securities Portfolio
17 Investment Securities Portfolio HighlightsHigh quality, liquid, diverse portfolio with relatively short duration.Fair value of $518.75 million(1) at 12/31/19 (an increase of $78.7 million in 4Q’19).Net unrealized gain of $4.7 million at 12/31/19 (representing 0.9% of amortized cost).78% of the po
Slide 18: Credit Quality Summary
18 Credit Quality Summary Note 1: Non-performing loans and non-performing assets exclude troubled debt restructurings that are performing.Note 2: 12/31/16 30 to 89 days delinquent data excludes $1.63 million of payment plan receivables that were held for sale. Non-performing Assets ($ in Millions) O
Slide 19: Credit Cost Summary
19 Note: Dollars all in millions. Provision for Loan Losses Loan Net Charge-Offs/Recoveries Allowance for Loan Losses Credit Cost Summary
Slide 20: Classified Assets and New Default Trends
20 Classified Assets and New Default Trends Note: Dollars all in millions. Total Classified Assets Commercial Loan New Defaults Total Loan New Defaults Retail Loan New Defaults
Slide 21: Troubled Debt Restructurings (TDRs)
21 Troubled Debt Restructurings (TDRs) TDR HighlightsWorking with client base to maximize sustainable performance.The specific reserves allocated to TDRs totaled $5.2 million at 12/31/19.A majority of our TDRs are performing under their modified terms but remain in TDR status for the life of the loa
Slide 22: CECL (ASU 2016-13) Countdown
CECL (ASU 2016-13) Countdown 22 Description of Task / Action Step Date Status / Notes 1. Full transition of Excel based incurred allowance for loan losses (ALLL) model into a third-party software solution. 1Q’19 Parallel runs completed in 2018 and full transition in 1Q’19. 2. Select CECL calculation
Slide 23: Final 2019 Actual Performance vs. Original Outlook
Final 2019 Actual Performance vs. Original Outlook Category Outlook Lending Continued growthIBCP goal of high single digit (8% to 9%) overall loan growth in 2019, primarily supported by increases in commercial loans, mortgage loans and consumer loans. Expect much of this growth to occur in the last
Slide 24: 2020 Initial Outlook
2020 Initial Outlook Category Outlook Lending Continued growthIBCP goal of mid- single digit (approximately 7%) overall loan growth in 2020, primarily supported by increases in commercial loans, mortgage loans and consumer loans. Expect much of this growth to occur in the last three quarters of 2020
Slide 25: Strategic Initiatives
Strategic Initiatives Growth1. Improve net interest income via balanced loan growth, disciplined risk adjusted loan pricing and active management of deposit pricing. 2. Innovative and targeted customer acquisition, retention and cross sales strategies leveraging data analytics, inside sales staff, a
Slide 26: Q&A and Closing Remarks
Q&A and Closing Remarks Question and Answer SessionClosing RemarksThank you for attending !NASDAQ: IBCP 26